Even A Small Drop in Mortgage Rates Could Mean Relief for Homeowners, Report Says

Even a modest drop in mortgage rates could offer homeowners some relief from high borrowing costs, according to a recent report.

The August Mortgage Monitor report from financial services firm and exchange operator Intercontinental Exchange projects the average 30-year fixed mortgage rate could fall to 6.3% by January 2026, the most optimistic six-month forecast since April.

If rates do come down to 6.3% from recent levels around 6.6%, the company estimates 3 million homeowners could be in position to refinance their home, almost double as many at current rates. If rates fall to 6.125%, that figure could climb to 4 million, the report found. 

Refinancing at a lower rate can significantly reduce monthly mortgage payments. The average borrower who decided to refinance cut their rate by 0.85 percentage points and saved an average of $240 in monthly mortgage payments in the second quarter, the study found.

Young Homebuyers ‘Betting Their Financial Future’

Many borrowers, particularly younger homeowners, are counting on refinancing their home, a recent survey showed.

Home refinancing in the next three years was important or extremely important to over half of all homeowners surveyed by TrueWork, according to the employment and income verification service provider’s 2025 Recent Homebuyer Report, with a far larger proportion of Gen Z and millennial homeowners than boomers saying their financial wellbeing hinges on being able to refinance at a lower rate.

“Younger buyers are betting their financial future on the hope that interest rates will drop significantly enough to make refinancing viable,” said TrueWork president Ethan Winchell.”

Homeownership has become unaffordable for many Americans as high mortgage rates, on top of rising home prices, push costs higher, though rising expectations the Federal Reserve will cut interest rates next month have bolstered hopes some relief from high mortgage rates could be coming soon.